US Department of Labor Urges ‘Extreme Care’ Before Adding Crypto to 401(k) Plans

The department warned that cryptocurrency investments present “significant risks and challenges to participants’ retirement accounts.”

AccessTimeIconMar 10, 2022 at 9:42 p.m. UTC
Updated Mar 10, 2022 at 10:34 p.m. UTC
Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

Michael Bellusci is CoinDesk's crypto reporter focused on public companies and digital asset firms.

Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

The U.S. Department of Labor is recommending 401(k) plan sponsors to “exercise extreme care” before they consider adding a cryptocurrency option to their investment menu for plan participants.

  • The Labor Department said it has become aware in the last few months of firms marketing crypto investments to 401(k) plans as investment options, according to a statement Thursday.
  • “At this early stage in the history of cryptocurrencies, the Department has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies,” the Labor Department wrote.
  • The Labor Department said crypto presents “significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft and loss.” It highlighted as reasons speculation and volatility, challenges to making informed investment choices, custodial and record-keeping concerns, the lack of reliability of cryptocurrency valuations and an evolving regulatory environment.
  • Consequently, the Employee Benefits Security Administration (EBSA) plans to “take appropriate action to protect the interests of plan participants and beneficiaries with respect to these investments,” according to the statement. Those actions would include questioning plan sponsors that offer crypto investments how they can handle the highlighted risks.
  • U.S. President Joe Biden signed a first-of-its-kind executive order on cryptocurrencies on Wednesday, directing federal agencies to coordinate their approach to the sector.
  • The “whole-of-government” effort to regulate the crypto industry focuses on consumer protection, financial stability, illicit uses, leadership in the global financial sector, financial inclusion and responsible innovation, according to a fact sheet accompanying the Biden order.

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Author placeholder image

Michael Bellusci is CoinDesk's crypto reporter focused on public companies and digital asset firms.


Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Author placeholder image

Michael Bellusci is CoinDesk's crypto reporter focused on public companies and digital asset firms.